With just Rs 5,000 per month you can save tax and achieve your crorepati dream too

The average return generated by ELSS funds in last five years is 18.7 per cent with the worst being 12.39 per cent.

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New Delhi: Saving a corpus of Rs 1 crore before the age of 60 is a dream for most of us. Accumulating this corpus although not very difficult but requires little bit of discipline. With inflation being a major risk to this goal, traditional investment plans like bank fixed deposits and recurring deposits can hardly help you achieve this dream. For example, if a 25-year old person starts saving Rs 5,000 per month in a recurring deposit, it will take him 37 years to save a corpus of Rs 1 crore (with 7 per cent annualised interest).

However, the same person can accumulate a Rs 1 crore corpus by investing Rs 5,000 every month in just 26 years if he invests in equities ( with 12 per cent annual return expectation). Equities as an asset class has the potential to deliver higher returns, say personal finance experts. In the last two decades, Sensex has delivered an annualised return of over 12 per cent.

According to experts, the best way to invest in equities in through a diversified equity mutual fund. Volatility is the biggest risk in equity investment but it can be mitigated by investing a small amount of money in regular intervals for long term or through Systematic Investment Plan (SIP), say experts.

Among diversified equity mutual funds, ELSS (Equity Linked Savings Scheme) is another category which also helps you save tax along with generating superior returns in the long term. ELSS funds are also superior compared to other investment options under Section 80C of the Income Tax Act. The lock-in period (3 years) in an ELSS scheme is the minimum compared to other investment avenues available under Section 80C. One can invest up to Rs 1.5 lakh in a year in an ELSS fund to get tax benefit.

According to domestic brokerage IIFL, the average return generated by ELSS funds in last five years is 18.7 per cent with the worst being 12.39 per cent. Although past returns are not an indication of future returns, one can expect 3-4 per cent return premium from equities over fixed deposit returns in the long term, say experts.

One can accumulate Rs 1 crore corpus by investing just Rs 4,848 every month for 30 years even if we reduce annual return expectation to 10 per cent, which is a decent expectation if you invest through SIP in an ELSS fund, say personal finance experts.

With just Rs 5,000 per month you can save tax and achieve your crorepati dream tooDescription:The average return generated by ELSS funds in last five years is 18.7 per cent with the worst being 12.39 per cent. Times Now